The Maharashtra Authority of Advance Ruling (AAR) in its recent ruling in the case of Mr. Amogh Ramesh Bhatawadekar has ruled that 18% GST is applicable on the service of Online Gaming. It has further been held that in case of import of online gaming services by a registered person, reverse charge will be applicable.
Facts of the case:
- The Applicant, Mr. Amogh Ramesh Bhatawadekar is a supplier in digital goods i.e. online games.It is a proprietary concern and located at Thane.
- The Applicant has not obtained GSTIN under the impression that whatever services they are rendering is export of e-goods.
Issues on which ruling was sought:
The applicant has sought advance ruling on various issues as under:
- Firstly, whether “e-goods” as commercially known in the market are “goods” as defined in the GST Acts or are they services as per GST Act.
- Secondly, if they are services what is SAC classification and rate of GST on its sale/ supply within the state?
- Thirdly, under what circumstances IGST under reverse charge will be applicable or whether it is applicable in the situation of procurement from foreign suppliers and supply from out of India.
- Fourthly, if the customer is from India and paying the consideration in dollar, whether it will be allowed as exports or if not allowed as exports then whether GST is leviable. What is the rate of SGST & CGST or IGST. Under which SAC.
Contention of the Applicant:
Applicant has contended as under:
a) Digital goods / e-goods are not necessarily goods as commonly understood& defined in the GST Acts but they can at best be called as ‘services’.
(b) They are supply of services done through internet or mails. There is no delivery of e-goods as such.
(c) the said e-goods, are stored on CLOUD which are located outside India, & are purchased from vendors outside India who sent it to the CLOUD as identified by the buyer / vendor/ the applicant.
(d) The e-goods are not received by the seller in India but are stored on CLOUD hence it cannot be said to be imports in India, hence out of purview of reverse charge mechanism under the IGST Act
(e) The buyers are usually from abroad, who pay in dollars directly through PAYPAL, therefore it is supply outside India taking it outside purview of IGST levy. It is export of services i.e. it is out and out services not liable to either IGST or CGST & SGST.
Order of Maharashtra AAR: Deliberation and Ruling
- Section 2(17) of the IGST Act , 2017 defines ‘online information and database access or retrieval services’ (OIDAR) which includes online gaming thus the e-goods (online gaming) will be considered as services under the GST law.
- Online gaming falls under SAC 998439 and attracts GST rate of 18%.
- In case where the supplier of OIDAR is located outside India and the recipient is a business entity (registered person) located in India, the reverse charge mechanism will be triggered and the recipient in India will pay tax.
- The applicant, an Indian citizen is supplying services to Indian citizens in India. In such cases transaction can only be in Indian rupees therefore question of any exports does not arise and GST will be leviable.
- Since both supplier and recipient are located in taxable territory , the online gaming will not be considered as exported and the applicant will have to discharge his GST liability on amounts received for supplying such services.
In view of above deliberations the coram consisting of T.R. Ramnani and P.Vinitha Shekhar ruled that E-goods, in this case ‘Online Gaming’ will be covered under services under the GST Act. The AAR ruled that the SAC for the online gaming will be 998439 and 18% GST will be applicable on the service supplied by the applicant.
The AAR said that in the situation of procurement from foreign suppliers & supply from out of India the applicant has to discharge IGST liability under reverse charge mechanism. The Authority said that since both, the customer and the applicant are in India. GST would be liable at the rate of 18% under SAC 998439.
The AAR didn’t answered to the question asked about applicability of tax in case the customers are from abroad remitting foreign exchange , as requisite details for determining place of supply for OIDAR under Section 13(12) of the IGST Act were not made available.
Also Read: Services subject to reverse charge mechanism under GST Law : At a glance
READ / DOWNLOAD ORDER:
***
[rainbow]Don’t miss free GST e-books, next GST Update / Article / Judicial pronouncement[/rainbow]
Subscribe our portal and get FREE GST e-books , articles and updates on your e-mail.
Resolve your GST queries from national level experts on GST free of cost.
Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
